#RiskManagement #moneymanagement
Hey, guys,
this is a continuation of the risk management tutorial.
Part 3
STOP LOSS Size.
Most traders follow the strategy of not risking more than 2-5% of their total deposit balance per trade. This means that it is not the size of your position that is equal to 2-5%, but the size of your STOP LOSS that you risk is equal to that amount.
Personally, I use a stop size equal to a specific amount of money, but it should not exceed 2%. It is important to always use one position size and one stop size.
For beginner traders it is appropriate to use a smaller percentage of 0.5%-1%. This way you gain experience in the beginning, and it doesn't matter whether you lose 0.5% or 2%.
According to our example with a deposit size of 10 000$ the stop size is from 200$ per one trade.
It is important to have the same size of stop and position size always regardless of the prospectivity of the deal in our opinion, in this case on a long distance even with 50-60% of successful trades you will trade in the plus.
Position size.
If we decided to open a deal, while observing the risk of 2% of the deposit ie 200$ Now how do we calculate the size of the position on the deal. Let's assume that the cancel of our scenario that is the place where we will get a stop from our entry point is equal to 4% of this value will depend on the size of our position and is determined as follows.
Amount of risk / Distance to STOP LOSS in percent.
In our example - 200$ /4% = 5000$
Stay tuned.